Audit of Mobile Easy Charge Agents

A/c entries 2077 views 8 replies

daVe..

Student

1431 Points Joined March 2008

Mobile Easy Charge rules the world. From CEO's to Chaya shop owners everybody is addicted to this syndrome. Well.. Jokes apart!

The following is a brief of the concept of Easy Charge:

To put it simple Easy Charge is nothing but the talk time credit that is transferred from Telecom operators to customers via Easy charge Agents.

Telecom Operators --------> Easy Charge Agents ----------> Retail Outlets ---------> Customers

The Easy Charge Agents profit counts on the margin that the Telecom operator gives the agent. Lets get into the numbers!!!

An Easy Charge Agent purchases Easy Charge (talk time) Worth, (say Rs. 10,600/-), the effective money he remmits to the Telecom Operator would be Rs. 10,000/ only .(The recharge credit (purchase) is transferred to his mobile from the operator directly.)

The Easy Charge Credit he transfers to the retail outlet would be Rs. 10,600/- The effective money he collects from the retail outlet would be Rs. 10,150/-. The retail outlet inturn sells it at Rs. 10,600/- to the customers.

Customers -------> Pays Rs. 10,600/- for his purchase from the Retail outlet..(Purchase Value Rs. 10,600)

Retail Outlets --------> Pays Rs. 10,150/- for his purchase from the EC Agent..(Purchase Value Rs. 10,600)

Easy Charge Agents--> Pays Rs. 10,000/- for his purchase from the operator..(Purchase Value Rs. 10,600)

Telecom Operators---> Gets Paid Rs. 10,000/- for his sales.(Sale Value Rs. 10,600)

Please advise on the accounting entries for the purchase and sale from the Easy Charge Agent's Point of view.

Advise from Experts in the telecom sector would be preferred.

Replies (8)

daVe..

Student

1431 Points Joined March 2008

Originally posted by :David
"	Mobile Easy Charge rules the world. From CEO's to Chaya shop owners everybody is addicted to this syndrome. Well.. Jokes apart! The following is a brief of the concept of Easy Charge: To put it simple Easy Charge is nothing but the talk time credit that is transferred from Telecom operators to customers via Easy charge Agents. Telecom Operators --------> Easy Charge Agents ----------> Retail Outlets ---------> Customers The Easy Charge Agents profit counts on the margin that the Telecom operator gives the agent. Lets get into the numbers!!! An Easy Charge Agent purchases Easy Charge (talk time) Worth, (say Rs. 10,600/-), the effective money he remmits to the Telecom Operator would be Rs. 10,000/ only .(The recharge credit (purchase) is transferred to his mobile from the operator directly.) The Easy Charge Credit he transfers to the retail outlet would be Rs. 10,600/- The effective money he collects from the retail outlet would be Rs. 10,150/-. The retail outlet inturn sells it at Rs. 10,600/- to the customers. Customers -------> Pays Rs. 10,600/- for his purchase from the Retail outlet..(Purchase Value Rs. 10,600) Retail Outlets --------> Pays Rs. 10,150/- for his purchase from the EC Agent..(Purchase Value Rs. 10,600) Easy Charge Agents--> Pays Rs. 10,000/- for his purchase from the operator..(Purchase Value Rs. 10,600) Telecom Operators---> Gets Paid Rs. 10,000/- for his sales.(Sale Value Rs. 10,600) Please advise on the accounting entries for the purchase and sale from the Easy Charge Agent's Point of view. Advise from Experts in the telecom sector would be preferred.	"

Anybody there to resolve my query????

Sunali

Learner

1317 Points Joined August 2008

Hi Dave...

I thnk easy charge agents can directly record purchase at Rs. 10000/- and sale at Rs. 10150/- i.e. the respective prices....an can book profits..

Hwever, U can also try experts section...

daVe..

Student

1431 Points Joined March 2008

hi sunali that was a very good suggestion..... bt then when you try to incorporate the client's internal control (i.e. a record to track the quantum of commission recvd/paid on a single purchase/sale etc.,) the entry becomes complex.

For instance the mistake my client made was...... he passed an entry to fill the gap between purchase and purchase consideration/ sale and actual receipt. He used the nomenclature Commission recvd/Commission Paid to fill in the gap. The said terms though used purely for control purposes, attracts TDS, which he is not actually liable to deduct.

Just to to record Purchase and sale, and book the earned profits, the entry suggested by you will perfectly fit in.

Sunali

Learner

1317 Points Joined August 2008

Hi Dave...

Hw d thngs were settled thn...?...

if U can explain pls..

daVe..

Student

1431 Points Joined March 2008

Heys... Guess yo more interested than me in settling the issue... Lolz... Dats da spirit...gr8.. Sustain it. Hmmm... My client has now been convinced that it is not possible to incorporate his internal control techniques unless hez got a veteran in that place to take care of his book keeping needz... He has now migrated from TALLY to an industry specific accounting software, which should take care of all his reporting needs.

Sunali

Learner

1317 Points Joined August 2008

thx..

Anup

C.A Final Student

70 Points Joined September 2008

Well its an case of LAPU offered by Telecom operators to its agents the difference of Rs. 150/- Between Purchase price and sale price of agent is considered as an gross profit. An G.P. Ratio of 1.5% and for strenrhening the internal control one can use tally also. There is no use of migrating to other software when you didnt understand the proper accounting flow of the transaction. Its an case of trading and not of an commission agent. Its my opinion only.

Suggesstions are welcommed

daVe..

Student

1431 Points Joined March 2008

Dear Anup,

I do agree with you and consider your ratios valid. It is not that tally can't be used for his control, as I have mentioned earlier. But then the control I mentioned here is not only confined to tracking his commission, but it also includes other complex transactions like accounting for Activation claims, monthly performance bonus etc., which is always transacted in terms of EC. As I had mentioned in my earlier post, the man behind the business is just a novice accountant and he finds difficult to incorporate the said transactions.

Migration to the new accounting package was just to make things simple and effective and is no way related to lack of proper understanding of the accounting flow, as I read in your post. Moreover, the new package way recommended by the Telecom Operator, this is for your information.